Digitalisation of Retail and Corporate Banking

Insightive.tv: Can you give me a brief overview of digital contracting at Erste Group?

Petia: In the area of digital contracting we have, for our retail clients, developed a user-friendly application that is successfully being used in Austria. It enables easy client acquisition via payment cards ordering or account opening with just a click. The application process lasts only a few seconds and is fully digital. The mobile app with fingerprint login is also available. In general, we are aiming to broaden the digital scope to other services and to even offer access to other bank accounts.

For our corporate clients, we are in digital contracting falling a little bit behind. Currently, only a few “already on the market” solutions were introduced but we have launched several initiatives for large corporates in other areas. For example, an online app for reverse financing and confirming was introduced. This attitude allows us to acquire large corporate accounts providing them with advanced financial services that are fully automated and electronic.

Colleagues in my teams are mainly dealing with a cross-border settlement for the entire Erste Group and domestic payments for Austria. We process around 15 million cross-border transactions and 350 million domestic transactions per year. Most of those transactions are straight through digital. Only 5% of transactions are delivered on paper and even from those 98% run through the system automatically once scanned (STP). Remaining 2% of transactions have to be processed manually due to corrections.

In principle, the digital penetration depends on the process. For instance, in the area of account opening, we have just started with electronic client onboarding. However, the digital penetration rate for that process is very low mainly due to the local regulations and status of the market.

To conclude, I would say that overall digitalization in our bank is about 50% across all the segments. If we look at an overview, including the retail segment, we might be somewhere at about 50% digital.

Insightive.tv: What are your main priorities when it comes to digitalisation?

Petia: Our targets in this area are mainly connected to the improvement of client experience. Increasing the speed and lead time of the payment transactions are the main priorities mirrored in our KPIs. The process efficiency improvements and subsequent savings in terms of headcount are also a topic but not priority number one.

Digital operations bring less complexity than human capital. Even if our technology was more expensive than labour, we would still digitalise.

Digitalisation is important for Erste Group but we also need to reflect preferences of our clients. We realised that not all of our clients are ready to use technology extensively. Electronic identification or electronic signatures can cause negative disruption for some of our clients. As a result, for payments we use a mixture of authorization methods. This would include for example voice-biometrics combined with local methods. But we definitely want to support transition of our clients to digital channels as quickly as possible.

Insightive.tv: Do you use third party contractors to build and maintain these systems?

Petia: It depends on the process. If we take the example of client onboarding, this is the process where we partner with several external providers. On the other hand, for the large corporate lending we are supported by Credit Bureau, but we do the client analysis ourselves. In general, we are more and more investing in the data providers, in client data management procedures and corporate data registers like SWIFT. We also plan to involve local corporate registries and build relationships with scoring companies.

We tend to have a mixture of local providers and local vendors, along with bigger providers. For instance, in the Czech Republic, a process that sources biometrics technology through local providers was introduced and we have a similar program in Croatia. But group-wide, we do not use such third party suppliers because we operate in areas with different regulations. So, at the moment, we prefer to source local solutions that fit local expectations.

We then try and establish these relationships with different data source suppliers within our digital channels — so it is a mixed approach, but we are not building our own systems. We are willing to work with ‘Fintechs’ to provide specific services that we don’t have. But, on the front end, we want to embed them in our own experience and platform. So there we will be doing it ourselves.

Insightive.tv: How do you look for new vendors that might be able to improve your business?

Petia: It’s different for different things. In data management, we rely on feedback from our peers. On the other side, we do a lot of ‘proof of concept’ with small ‘Fintechs’ where we challenge them — run a trial with several and see which one fits us the best.

On the retail side, we work with several ‘Matchmakers’ to bring us together with providers that meet our requirements.

Insightive.tv: What are the biggest digitalisation challenges that you have faced?

Petia: There are several digitalisation challenges that we are facing for some time now. In terms of client segments, we invest enormous effort in client data generation and maintenance in corporate areas due to the extensive regulatory requirements for client identification.

To solve this situation, the major issue is to create a unique real-time repository where we can track all corporate clients across Erste Group and be able to use different modulators to compare. This sounds easy, but it is not. We have to, in real time, consistently check a lot of external resources that are not always even available. Client identification process currently involves manual steps that we are striving to digitalise. Proof of concept with robotics and other technologies makes this easier.

In terms of processes, the biggest challenge is that the majority of the bank is entrenched in the old IT infrastructure. Connecting new technology with old core systems is difficult for Operations and IT.

In order to confront these challenges, we are, on one side, looking for partnerships that can overcome our rigid back ends and on the other side, experimenting with technologies to have a lot of small and variable solutions.

Insightive.tv: What change do you see over the next three years?

Petia: We would love to allow our clients to onboard without explicitly having to come to the bank. The necessary pre-requisite is to find a KYC reference with other reliable institutions. We would like to make onboarding as simple as possible so that clients don’t need to deliver the same information to every bank in which they are opening an account.

On the other hand, we are improving the abilities of our system for authorization decision-making process to broaden the ability of corporate clients to add new authorization layers and prevent fraud.

Insightive.tv: What are the main drivers behind digitisation at Erste Group?

Petia: We are the biggest retail bank in the region. So, in retail, we need to stay relevant to the client. We need to keep our recognition being important but simple; otherwise, we are in danger of losing part of our market share.

On the corporate side, we recently developed a strategy to become the bank of choice for corporate clients. Because we are a savings bank, and are committed to the society in which we are operating, our strategy is to focus on small SMEs. Here, we want to become as digital as our client need. For small companies, this often means very digital.

We have very good support from our CEO because our bank is committed to this change. We said that we really wanted to focus on being the best bank for SMEs, so here we have great management support — which allows us to have a drive.

Petia Niederländer is the Head of Retail and Corporate Operations at Erste Group. Particularly, she has a strong expertise in corporate operations in Austria, overseeing payments, client onboarding, large corporate loan operations and cash management.

Erste Group is one of the largest financial services providers in Eastern part of EU. It is the third largest bank in Austria and provides financial services to almost 16 million clients across seven countries.